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QUESTION

Assume you purchase a 5% coupon bond (semi-annual interest payments) when the annual yield to maturity is 6% the bond has a four years remaining to

Assume you purchase a 5% coupon bond (semi-annual interest payments) when the annual yield to maturity is 6% the bond has a four years remaining to maturity ( in four years, the bond will be redeemed at par)

1.    What is the bond current price?

2.    what is the bond current yield?

3.    what is the bond's expected capital gain yield for the current year?

4.    if you reinvested the semi-annual coupon payments at an 7% annual rate (3.5% every 6 month) over the 4 year period, what is your annual realized ( or horizon yield) over your four year period ?

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